New Zealand’s Fonterra Co-Operative Group (FCG.NZ) reported a more than doubled annual profit on strong cheese and protein margins and a bigger final dividend on Thursday, pushing its shares higher.
Higher product prices and strong demand for dairy components and food services helped the world’s largest dairy exporter.
For the year ended July 31, the company declared a normalized profit after tax of NZ$1.33 billion ($788.3 million), compared to NZ$591 million a year earlier. Fonterra’s shares rose 3.9% by 0216 GMT, their biggest day in six months, while the broader market (.NZ50) fell 0.2%. Fonterra Shareholders’ Fund (FSF.NZ) rose 7.0% to its highest level since May 2021.
Fonterra had a tough start to fiscal year 2024 as it lowered its farmgate milk price projection twice in August due to weak international dairy prices and weaker demand from China, the world’s biggest dairy importer. Fonterra chief financial officer Neil Beaumont told Reuters on Thursday, “In the near term, there have certainly been some headwinds (in China) despite the benefits we saw from the COVID-19 reopenings.”
The dairy major anticipates inflation and farmgate milk prices to affect production. Fonterra estimates continuing operations to earn 45–60 NZ cents per share in fiscal 2024, down from 80 NZ cents in fiscal 2023.
Beaumont said price increases at recent global dairy trade auctions, the return of Chinese customers, and the revision of the China-New Zealand Free Trade Agreement suggested demand for New Zealand milk powders might rise early next year.
The Auckland-based corporation paid 40 NZ cents per share in a final dividend, up from 15 last year.
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